Project 2: Review of Merchandising Cycle

[The following information applies to the questions displayed below.]

Wallys Widget Company (WWC) incorporated near the end of 2011. Operations began in January of 2012. WWC prepares adjusting entries and financial statements at the end of each month. Balances in the accounts at the end of January are as follows:

Project 2: Review of Merchandising Cycle The following information applies to the questions displayed below.] Wally's Widget Company (WWC) incorporated near the end of 2011. Operations began in January of 2012. WWC prepares adjusting entries and financial statements at the end of each month. Balances in the accounts at the end of January are as follows $ 4,750 $ 2100 $14,000 $5,800 5,520 19,820 Unearned Revenue (35 units) Cash Accounts Receivable Allowance for Doubtful Accounts Inventory (40 units) s10,850 Accounts Payable (Jan Rent (1300) Notes Payable 2,800 Contributed Capital Retained Earnings- Feb 1, 2012 WWC establishes a policy that it will sell inventory at $150 per unit In January, WWC received a $4,750 advance for 35 units, as reflected in Unearned Revenue WWC's February 1 inventory balance consisted of 40 units at a total cost of $2,800. WWC's note payable accrues interest at a 12% annual rate WWC will use the FIFO inventory method and record COGS on a perpetual basis. February Transactions 0201 Included in WWC's February 1 Accounts Receivable balance is a $1,400 account due from Kit Kat, a WWC customer. Kit Kat is having cash flow problems and cannot pay its balance at this time. WWC arranges with Kit Kat to convert the $1,400 balance to a note, and Kit Kat signs a 6-month note, at 12% annual interest. The principal and all interest will be due and payable to WWC on August 1, 2012 02/02 WWC paid a $450 insurance premium covering the month of February. The amount paid is recorded directly as an expense 02/05 An additional 190 units of inventory are purchased on account 02/05 WWC paid Federal Express $380 to have the 190 units of 020 Sales of 160 units of inventory occurred during the period of 25 The 35 units that were paid for in advance and recorded in by WWC for $14,250 terms 2/15, n30. inventory delivered overnight. Delivery occurred on 02/06 02/07- 02/10. The sales terms are 2/10, net 30 January are delivered to the customer 5 25 units of the inventory that had been sold on 2/10 are returned to WWC. The units are not damaged and can be resold. Therefore, they are returned to inventory. Assume the units returned are from the 2/05 purchase 026 WWC pays the first 2 weeks wages to the employees. The total paid is $3,000. 02 Paid in full the amount owed for the 2/05 purchase of inventory. WWC records purchase discounts in the current period rather than as a reduction of inventory costs 02/8 Wrote off a customer's account in the amount of $1,400. 9 $4,200 of rent for January and February was paid. Because all of the rent will soon expire, the February portion of the payment is charged directly to expense 219 Collected $8,800 of customers' Accounts Receivable. Of the $8,800, the discount was taken by customers on $4,500 of 02/26 WwC recovered $480 cash from the customer whose 0 A $900 utility bill for February arrived. It is due on March 15 0228 WWC declared and paid a $800 cash dividend account balances; therefore WWC received less than $8,800. account had previously been written off (see 02/18) and will be paid then. Project 2: Review of Merchandising Cycle The following information applies to the questions displayed below.] Wally's Widget Company (WWC) incorporated near the end of 2011. Operations began in January of 2012. WWC prepares adjusting entries and financial statements at the end of each month. Balances in the accounts at the end of January are as follows $ 4,750 $ 2100 $14,000 $5,800 5,520 19,820 Unearned Revenue (35 units) Cash Accounts Receivable Allowance for Doubtful Accounts Inventory (40 units) s10,850 Accounts Payable (Jan Rent (1300) Notes Payable 2,800 Contributed Capital Retained Earnings- Feb 1, 2012 WWC establishes a policy that it will sell inventory at $150 per unit In January, WWC received a $4,750 advance for 35 units, as reflected in Unearned Revenue WWC's February 1 inventory balance consisted of 40 units at a total cost of $2,800. WWC's note payable accrues interest at a 12% annual rate WWC will use the FIFO inventory method and record COGS on a perpetual basis. February Transactions 0201 Included in WWC's February 1 Accounts Receivable balance is a $1,400 account due from Kit Kat, a WWC customer. Kit Kat is having cash flow problems and cannot pay its balance at this time. WWC arranges with Kit Kat to convert the $1,400 balance to a note, and Kit Kat signs a 6-month note, at 12% annual interest. The principal and all interest will be due and payable to WWC on August 1, 2012 02/02 WWC paid a $450 insurance premium covering the month of February. The amount paid is recorded directly as an expense 02/05 An additional 190 units of inventory are purchased on account 02/05 WWC paid Federal Express $380 to have the 190 units of 020 Sales of 160 units of inventory occurred during the period of 25 The 35 units that were paid for in advance and recorded in by WWC for $14,250 terms 2/15, n30. inventory delivered overnight. Delivery occurred on 02/06 02/07- 02/10. The sales terms are 2/10, net 30 January are delivered to the customer 5 25 units of the inventory that had been sold on 2/10 are returned to WWC. The units are not damaged and can be resold. Therefore, they are returned to inventory. Assume the units returned are from the 2/05 purchase 026 WWC pays the first 2 weeks wages to the employees. The total paid is $3,000. 02 Paid in full the amount owed for the 2/05 purchase of inventory. WWC records purchase discounts in the current period rather than as a reduction of inventory costs 02/8 Wrote off a customer's account in the amount of $1,400. 9 $4,200 of rent for January and February was paid. Because all of the rent will soon expire, the February portion of the payment is charged directly to expense 219 Collected $8,800 of customers' Accounts Receivable. Of the $8,800, the discount was taken by customers on $4,500 of 02/26 WwC recovered $480 cash from the customer whose 0 A $900 utility bill for February arrived. It is due on March 15 0228 WWC declared and paid a $800 cash dividend account balances; therefore WWC received less than $8,800. account had previously been written off (see 02/18) and will be paid then